Where the Clarity Act stands ahead of Tuesday’s Senate vote

The United States Senate heads into a consequential vote Tuesday on sweeping cryptocurrency legislation after Republicans released a final draft that addresses several of the biggest sticking points in negotiations — but leaves questions about whether the bill has enough support to advance.

The Senate will vote for the first time on whether to advance the legislation as part of an initial procedural process, with the latest text drawing optimism from some in the crypto industry and renewed opposition from banks and lawmakers who say key provisions still fall short.

Senate Republicans released new draft text late Sunday that aims to tackle three issues that have been in the middle of negotiations — President Donald Trump's crypto conflicts of interest, an ongoing battle between crypto and banks on stablecoin rewards and software developer protections.

Key negotiator Sen. Cynthia Lummis, R-Wyo., pushed for fellow lawmakers to advance the bill.

Clarity's long, winding road

This past year, the Senate has been trying to advance its version of the Clarity Act, which would regulate the crypto industry for the first time comprehensively at the federal level, giving the Commodity Futures Trading Commission broader authority, while also giving jurisdiction to the Securities and Exchange Commission.

The House passed its version of the Clarity Act over a year ago, but the Senate has found itself fraught with hurdle after hurdle, from initially a fight between banks and crypto on how to regulate stablecoin rewards to software developer language and ethics.

The latest version from Sunday night gives state attorneys general a role in enforcing conflict-of-interest rules for public officials, amends the Blockchain Regulatory Certainty Act to remove references to a federal criminal statute and gives the Treasury secretary authority to impose an 18-month "circuit breaker" on stablecoin rewards if payment stablecoins trigger substantial deposit outflows.

It is unclear whether those changes are enough for the bill to get the necessary 60 votes to make it to the next vote. Some Democrats have waived concerns about ethics. Two Republican lawmakers, Sens. Susan Collins and John Cornyn, are seemingly undecided about how they will vote on Tuesday.

TD Cowen’s Washington Research Group, led by managing director Jaret Seiberg, is still giving it a 25% chance that the Clarity Act becomes law this year. The bill would still have to go back to the House, which has taken off the last two weeks in September, and so would mean the Clarity Act likely wouldn't get a vote until after November elections.

Ethics language may not be enough for more moderate Democrats, and language around state attorneys general authority is limited, Seiberg said.

"This is not a negotiated deal," Seiberg said. "Democrats are being presented with the final product."

Trump and ethics

One of the major sticking points over the past year has been how to address Trump's growing crypto interest. Trump's vast crypto wealth has grown to hundreds of millions of dollars linked to World Liberty Financial, run by his sons, and his

memecoin.

In July, Trump agreed to an ethics provision that would block a public official or employee, as well as their spouses, from issuing or sponsoring digital assets. The language says that the Department of Justice would enforce the provision, not state attorneys general. That language sparked criticism from Democrats who said it fell short.

The latest gives state attorneys general a role in enforcing conflict-of-interest rules for public officials, a key Democratic demand.

But the changes have not settled the issue.

Sen. Elizabeth Warren and other Democrats have raised questions about how the enforcement provisions would work in practice, arguing that state attorneys general would not have sufficient authority to bring cases directly against public officials, including the president.

Later on Monday, Warren led Democratic staff in the Senate Banking Committee in an analysis of the latest version of the bill, which says it would not prevent Trump from making even more money in crypto because the ethics piece is not enforceable given that the Justice Department would decide whether to bring an enforcement action against him.

"The bill contains only an empty provision allowing states to sue the Attorney General to try to force him to act," they said.  "It then allows Trump’s own Office of Government Ethics (OGE)—currently led by his hand-picked Acting Secretary of Labor—to issue a legal opinion unilaterally shutting down that lawsuit."

Fellow Democrats Sens. Ruben Gallego and Angela Alsobrooks have said they won't vote for the Clarity Act without ethics language in place. Both did not respond to a request for comment about the latest revised bill.

Later on Monday, Democratic Sen. Mark Warner said he believes the new ethics language is not enough.

'We have to live with it'

Senate Republicans also revised language in the Blockchain Regulatory Certainty Act, which broadly creates a safe harbor for non-custodial developers, clarifying that they are not money transmitters.

The latest text removes references to a federal criminal statute that would have protected non-controlling developers, changing how they would be protected from criminal prosecution. The Coin Center, which has advocated for that part of the bill, said on Monday that though BRCA as a whole is progress, it "stops short of resolving the essential criminal law issue" currently going through the courts.

"We are obviously very disappointed that critical protections for noncontrolling developers from misapplication of criminal law were removed," a crypto industry source told The Block.

Asked whether they believe Congress should hold up the Clarity Act to fix it, they said "tbd," and added that experts were reviewing the language.

A separate crypto industry source said that they don't like the change, but said "we have to live with it."

Rep. Tom Emmer, R-Minn, who cosponsored the bill initially, said Monday he has concerns about that section at a Solana Policy Institute event. He said he did not like that it would give up a "safe harbor on the criminal side," according to reporting from Bloomberg Government.

Banks v crypto

Another thorn in the Clarity Act's side has been the treatment of stablecoin rewards, which allow users to earn interest on deposited funds. Banks have warned that rewards will draw deposits away from traditional banks, while crypto firms say that restricting those rewards would hamper innovation — setting up a clash between two big players in Washington.

The revised bill gives the Treasury secretary authority to impose an 18-month "circuit breaker" on stablecoin rewards if payment stablecoins trigger substantial deposit outflows from community banks. The provision is intended to give the Treasury secretary a temporary tool to limit the impact of large-scale withdrawals on smaller banks.

Treasury Secretary Scott Bessent said he would not hesitate to use tools under the revised text.

However, bank trading groups said on Monday that that doesn't go far enough. In a letter to Senate leadership, eight groups, including the American Bankers Association and the Bank Policy Institute, said that a "circuit breaker" would only be activated after a significant amount of deposit flight has already happened.

"Congress should address this risk upfront by ensuring the Clarity Act prohibits payment stablecoin rewards and incentives that function like deposit interest, rather than waiting for harm to banks, borrowers and communities before regulators are empowered to respond. Further technical refinements are needed to ensure that the text clearly and directly prohibits interest-like payments on payment stablecoins," they said.

White House crypto adviser Patrick Witt aired frustrations about negotiations with banks during a panel with Crypto In America at the Solana Policy Institute on Monday. Witt pointed to the Treasury's added authority in the latest revised bill.

"What more do you want?" Witt said.

Updated at 9:40 p.m. UTC to include Warner